Venture capital is basically an aggregate of investors from all walks of life – this can include organizations, wealthy individuals, small businesses themselves and mutual funds – who will put up the money necessary to fund loans, in exchange for equity in your company. The benefit to them is that their investment grows with the company (similarly to stock-holders); the benefit to you is that you do not become laden down with interest payments and credit score-dependent loans.
Obtaining Venture Capital: The Process
In order to get started, you will likely need to throw a party for prospective venture capitalists o or have a function/even of some kind, at which you will present your ideas and company service/product. You can even prepare something called a “pitch deck” at the gathering, where you can set up a later meeting with a partner if he is interested.
Types of Venture Capitalism
There’s a handful of different investment types within the realm of venture capitalism; these include seed financing, first-stage financing, second-stage financing, startup financing, and bridge financing. As the name suggests, the first one (seed financing) is for great ideas that have very little work done to date; the venture capital will help fund the development – and even the research – for such ideas.
The second and third refer to different stages of the same process: first-stage financing is available for companies that are already several years old; the money is to help with marketing costs, infrastructure, inventory, etc. Second-stage financing is for expansion, which means that the product or service already has a great sales record. Start-up financing is exactly what it says, and bridge financing is related to mezzanine loans. It, effectively, is used to conclude the business that the venture capitalists have with your company as you make your initial public offering or plan to succumb to a merger/acquisition or sale.